Whether you are looking for a loan from a private lender or want to become a private lender yourself, the Rules of Thumb blog from MoneyThumb wants to make sure all of your questions about what private lenders are and what they do.
We have listed below the most FAQs about private lenders with what we hope are satisfactory answers to each question, along with other pertinent facts about private lenders:
Private Money Lenders FAQ
Working with private lenders is not a complex process, though it can be mysterious for investors who are unfamiliar with alternative financing methods. As you begin to ask how to find private lenders, make sure you don’t have any lingering confusion about the process. Read through the following frequently asked questions to make sure when you do find a private lender to work with, you know what to expect:
How Do Private Lenders Work?
Private lenders work by investing their capital into real estate deals in exchange for interest paid on the loan. They will work with investors to establish the terms of the loan, which will be paid back according to the term. Private lenders are often investors in their own right and turn to private lending as a way to expand their portfolios.
Are Private Lenders Regulated?
Private lenders are regulated by state and federal lending laws. Depending on where they are located, there is often a limit to the number of loans they can provide without a license. So while private lenders are not regulated as strictly as bankers, there are rules they must follow as well. For more information on the regulations in your state, be sure to research online.
Best Private Lending Companies
Private lending companies will offer the same benefits of working directly with a private lender, though the application and approval structure may look different. There are many personal loan companies and peer to peer lending platforms that investors can consider. Here are some of the best private lending companies out there:
- Citizens Bank
- Best Egg
How Much Do Private Lenders Charge?
Private lenders charge different interest amounts ranging from four to 12 percent. The amount they charge will be dependent on a number of factors including your investment history, the numbers of the deal at hand, the proposed term length and more. However, the good news is that oftentimes the interest rates will be negotiable. Remember as you practice your pitch that not only are you trying to secure financing, but also the best loan terms possible.
Your goal when working with private lenders should not be to simply land a deal and move on. Instead, you should seek out someone you can present deals to on a long-term basis. If you focus on building a strong relationship, you can secure financing for both your current and future investments.
Always remain professional when building a network, a strong portfolio and a great pitch can go a long way in landing a deal. By making strong connections and maintaining positive relationships with each lender you work with, you can help ensure you always have options when it comes time to finance a deal.